Microsoft's Device Strategy: The Remaining Flaw

Microsoft's Surface 2 and Surface Pro 2 represent big improvements over the originals, but they still make sense only for certain users.

Of all the critiques that have been directed at Microsoft's device strategy, Apple CEO Tim Cook's is probably the most apt: The Surface campaign is "confused."

"Confused" fits better than "doomed," "failing," or any of the other terms that seemed appropriate a few months ago, when the Surface line was defined entirely by unenthusiastic reviews, unsold inventory, rapid price reductions, and a $900 million writedown.

The harshest criticisms are no longer appropriate because the Surface 2 and Surface Pro 2 are big improvements. The former beats its predecessor in every regard, while the latter addresses the original Pro's biggest weaknesses, such as battery life. Windows 8.1 is also a much more cohesive experience -- even the Modern UI, whose once-anemic core apps are now full-featured enough for comfortable day-to-day use. The devices also come with pretty nice perks: a year of free Skype WiFi and 200 GB of SkyDrive storage for two years.

Why does this progress represent a confused strategy? Because the devices still cater to a single idea with limited short-term upside: desktop-laptop convergence. Hybrid devices might eventually be the norm, but for now, they represent a niche category.

If this weren't so, Windows 8 tablets would have already made an impression on the market. The research firm Gartner projected in September that the devices will account for just 1.7 percent of the field this year. IDC estimated in August that the devices accounted for 4 percent of second-quarter shipments, which suggests modest improvement, but the firm emphasized in October that Windows slates were struggling to win consumer support.

The subtext is clear: If tablets that supported true multitasking and native desktop apps were so appealing, they wouldn't have sold so poorly. Windows 8's rough edges deserve some of the blame, and Windows 8.1 should help. But if the core concept had more than niche appeal, more people would have taken a chance on some of the first-generation devices.

Apple still produces laptops without touchscreens and an iPad catalogue bereft of first-party attachable keyboards. The company's refusal to embrace convergence has had little perceptible impact on the iPad's marketshare. If anything, early iPad Air sales suggest Apple is poised to conquer new ground.

If you add up the preceding factors, demand for a superlative tablet experience is enormous. That's why Apple makes the most money, commands the most attention from developers, and dominates most usage-share metrics, as Tim Cook is fond of pointing out. It's also why Samsung, Amazon, and others have had success with premium Android devices. The market is big enough for many players.

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But Microsoft hasn't pursued this mainstream market. Both the Surface Pro and the Surface Pro 2 cater to much more specific needs. They're for people who want touch apps but don't need (or are at least willing to wait for) a fully developed ecosystem. They're for people who like to use their tablets in landscape mode more than in portrait mode. They're for people who need Microsoft Office but want to use it on a relatively small 10-inch screen, and who are willing to type on relatively cramped keyboards. Everything the devices excel at, in other words, appeals only to niches.

Take the Surface Pro 2's much-ballyhooed support for desktop apps. What is running Photoshop on a 10-inch screen if not a niche use case? Granted, the Pro 2 can also dock to an external monitor, which might sway some users. But powerful as it is, the Pro 2 still isn't a workstation replacement for desktop power users. It's a niche device for people who need power and portability in a very specific ratio.

To be fair, Surface-friendly niches are numerous enough for Microsoft to sell millions of units over the next year. It seems like a big number, but it's also one that the iPad Air has likely already annihilated. And that's where Microsoft's strategy becomes confused. The company has hyped its Surface products with the same gusto -- and willingness to spend -- that Apple applies to its iPads. But what is the company trying to achieve by doubling down on such a finite product category?

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That's definitely true. Several analysts have told me that some IT managers don't consider the Surface Pro 2 prohibitively expensive, given that it can replace two discrete devices. I can see schools being big Surface customers as well. Like I said, I think Microsoft will sell millions of them-- which will represent a dramatic improvement from the original edition of the Surface experiment, at least in percentage terms.

But I still think this kind of device can only be used for certain kinds of enterprise deployments. If you're a knowledge worker, for example, you really need a bigger screen and keyboard, and the ability to dock the Pro models only mitigates this concern to a certain extent, since it also takes away the user's mobility while adding cost.

Convergence is only a convenience if it doesn't impose productivity-killing compromises-- and for many, I think the Surfaces' compromises make a clamshell laptop more attractive, especially given how thin, light and cheap some of the new Ultrabooks are. I can be productive on my Surface 2 and Surface Pro-- but for most tasks, I'll be more productive on my other, larger-screened devices.

And even if your company likes the convergence idea, how does Microsoft contend with similar (and often cheaper) offerings from Dell and HP? At this point, Microsoft has neither the sales pipeline nor the manufacturing resources to compete at scale with either of them, and both of them have new hybrid devices that cater to the same markets as the Surfaces.

And though the Surfaces seem workplace-oriented in differentiating features, Microsoft is still hoping for consumer sales and BYOD potential; it wouldn't be holding (lightly attended) midnight launch parties if this weren't the case.

I think the Surface 2 and Surface Pro 2 are both nice devices, and I'll have an in-depth review of the Surface 2 later this week that goes into more detail. But for what they cost and what they offer, they offer Microsoft only so much opportunity for growth. The fabled Surface Mini could a different story-- but by the time it arrives, how many potential buyers will have already purhcased a Nexus, Kindle, iPad Mini or (best case scenario for Microsoft) some Windows mini-tablet, like the smaller Dell Venues?

They're for people who want touch apps but don't need (or are at least willing to wait for) a fully developed ecosystem. They're for people who like to use their tablets in landscape mode more than in portrait mode. They're for people who need Microsoft Office but want to use it on a relatively small 10-inch screen, and who are willing to type on relatively cramped keyboards. Everything the devices excel at, in other words, appeals only to niches.

I don't doubt that that is all true, all but I suspect that Microsoft's target market is the IT managers who are deciding what client hardware they will be purchasing for the next refresh -- not individual consumers. (They'll bring their own devices to work, if they can). So factors like enterprise-grade security & integration with exisiting enterprise apps are going to be a big part of that equation --which gives Microsoft a pretty good advantage.

I don't see how MS is going to get out of the predicament it has faced with these devices for months now: Not quite a laptop, not quite a tablet. Meanwhile, the market has already moved on to liking the iPad Air and mini tablet form factors.

Even in large enterprises, it faces an uphill slog due to BYOD and people choosing Apple products.

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